solvency

Portugal, Ireland, Italy, Greece and Spain have to solve their depts by themselves, because Germany’s insolvency will be the end of Europe.

Seems like most politicians and some people in Europe believe that Germany is a cash cow and is able to pay their dept party till doomsday. But if Germany become insolvent, Europe, what will you do then?

In fact, economists estimate that Portugal, Ireland, Italy, Greece and Spain (PIIGS) need until one trillion euro to pay their depts. And it seems clear that this amount will be only one step in a very long story of the European Financial Stability Facility (EFSF) in the future called as European Stability Mechanism (ESM) the permanent eurozone rescue fund. Furthermore nobody is able to imagine the costs for an economic boost in these crisis countries. Who should pay that?

Tilts Germany then Europe dies

It’s a simple and plausible calculation. Germany counts depts amounting over two trillion euro in cash today. This means a state dept ratio of about 83 percent of its gross domestic product. In addition to that we have to count liabilities of 170 billion euro for ESM yet. But we have to calculate with the current 440 billion euro in worst case because all countries guarantee this amount if all others drop out. The German credit rating is “AAA” today yet and investors request no interests for their money.

But if we add only one trillion euro more to Germany’s current depts its state dept ratio will explode from 83 to 123 percent. Higher than Italy with its “BBB+” country rating. Thereafter the interest rates for German bonds explode into unaffordable hights and become a theat of the capacity to pay. The negative consequences of demographic development in Germany are not included in it.

Anyone can imagine that Germany’s insolvency will be the ignition for Europe’s collapse with incalculable consequences for economy and people in all countries.